Maxim Integrated Guides Below Estimates

Maxim Integrated (MXIM) reported 1st Quarter September 2018 earnings of $0.75 per share on revenue of $638.5 million. The consensus earnings estimate was $0.75 per share on revenue of $634.4 million. Revenue grew 10.9% on a year-over-year basis.

The company said it expects second quarter earnings of $0.59 to $0.65 per share on revenue of $570.0 million to $610.0 million. The current consensus earnings estimate is $0.73 per share on revenue of $627.7 million for the quarter ending December 31, 2018.

Maxim Integrated Products Inc designs, develops, manufactures and markets a range of linear and mixed-signal integrated circuits, commonly referred to as analog circuits, for number of customers in diverse geographical locations.

Maxim Integrated Reports Results For The First Quarter Of Fiscal 2019

SAN JOSE, Calif., Oct. 30, 2018 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $638 million for its first quarter of fiscal 2019 ended September 29, 2018, a 1% increase from the $633 million revenue recorded in the prior quarter, and an 11% increase from the same quarter of last year.

Tunc Doluca, President and Chief Executive Officer, commented, "Our September quarter results were solid. Compared to the same quarter last year, revenue and profitability grew strongly, driven by Automotive, Consumer, Industrial and Data Center. Looking forward, we are seeing softening business conditions. However, we believe our business model enables us to be successful in any environment. Due to our strong free cash flow and positive net cash balance, we plan to return 125 percent of free cash flow to shareholders this fiscal year, by increasing the share buyback. We believe buying our shares is the best use of our cash in the current environment."

Fiscal Year 2019 First Quarter ResultsBased on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the September quarter was $0.70. The results were affected by $8 million in pre-tax special items which primarily consisted of charges related to acquisitions. GAAP earnings per share, excluding special items was $0.75. An analysis of GAAP versus GAAP excluding special items is provided in the last table of this press release.

Cash Flow ItemsAt the end of the first quarter of fiscal 2019, total cash, cash equivalents and short-term investments were $2.56 billion, a decrease of $63 million from the prior quarter.

Notable items included:

Cash flow from operations: $207 million

Capital expenditures: $18 million

Dividends paid: $128 million ($0.46 per share)

Stock repurchases: $112 million

Adjusted trailing twelve months free cash flow was $915 million, which excludes a one-time tax payment of $178 million in the fourth quarter of fiscal 2018. Free cash flow is a non-GAAP measure and is defined by cash flow from operations less capital expenditures.

Business OutlookThe Company's 90-day backlog at the beginning of the December 2018 quarter was $418 million. Based on the beginning backlog and expected turns, our results for the December 2018 quarter are forecasted to be as follows:

Revenue: $570 to $610 million

Gross Margin: 65% to 67% GAAP (66% to 68% excluding special items)

EPS: $0.55 to $0.61 GAAP ($0.59 to $0.65 excluding special items)

Maxim Integrated's business outlook does not include the potential impact of any special items related to restructuring activity, acquisitions, or other business combinations that may be completed during the quarter.

A cash dividend of $0.46 per share will be paid on December 13, 2018, to stockholders of record on November 29, 2018.

Conference CallMaxim Integrated has scheduled a conference call on October 30 at 2:00 p.m. Pacific Time to discuss its financial results for the first quarter of fiscal 2019 and its business outlook. This call will be webcast by Shareholder.com and can be accessed at the Company's website at investor.maximintegrated.com.

Reconciliation of GAAP net income (loss) to GAAP net income excluding special items:

GAAP net income (loss)

$ 197,423

$ 194,172

$ 154,533

Special items:

Intangible asset amortization

7,688

12,603

12,816

Impairment of long-lived assets

—

—

42

Severance and restructuring

994

833

5,433

Other operating expenses (income), net

60

(71)

(844)

Interest and other expense (income), net

(378)

(941)

(84)

Pre-tax total special items

8,364

12,424

17,363

Other income tax effects and adjustments

4,754

1,194

(1,345)

GAAP net income excluding special items

$ 210,541

$ 207,790

$ 170,551

GAAP net income per share excluding special items:

Basic

$ 0.76

$ 0.74

$ 0.60

Diluted

$ 0.75

$ 0.73

$ 0.60

Shares used in the calculation of earnings per share excluding special items:

Basic

278,045

279,304

282,170

Diluted

282,454

283,934

286,437

Non-GAAP MeasuresTo supplement the consolidated financial results prepared under GAAP, Maxim Integrated uses non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude special items related to intangible asset amortization; impairment of long-lived assets; severance and restructuring; other operating expenses (income), net; interest and other expense (income), net; and other income tax effects and adjustments. We defined free cash flow as net cash provided from operations less gross capital expenditures. Management uses these non-GAAP measures internally to make strategic decisions, forecast future results and evaluate Maxim Integrated's current performance. Many analysts covering Maxim Integrated use the non-GAAP measures as well. Given management's use of these non-GAAP measures, Maxim Integrated believes these measures are important to investors in understanding Maxim Integrated's current and future operating results as seen through the eyes of management. In addition, management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in Maxim Integrated's core business across different time periods. These non-GAAP measures are not in accordance with or an alternative to GAAP financial data and may be different from non-GAAP measures used by other companies. Because non-GAAP financial measures are not standardized it may not be possible to compare these financial measures with other companies' non-GAAP financial measures, even if they have similar names. The non-GAAP measures displayed in the table above include the following:

GAAP Gross Profit Excluding Special ItemsThe use of GAAP gross profit excluding special items allows management to evaluate the gross margin of the Company's core businesses and trends across different reporting periods on a consistent basis, independent of special items including intangible asset amortization. In addition, it is an important component of management's internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents GAAP gross profit excluding special items to enable investors and analysts to evaluate our revenue generation performance relative to the direct costs of revenue of Maxim Integrated's core businesses.

GAAP Operating Expenses Excluding Special ItemsThe use of GAAP operating expenses excluding special items allows management to evaluate the operating expenses of the Company's core businesses and trends across different reporting periods on a consistent basis, independent of special items including intangible asset amortization; impairment of long-lived assets; severance and restructuring, and other operating expenses (income), net. In addition, it is an important component of management's internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents GAAP operating expenses excluding special items to enable investors and analysts to evaluate our core business and its direct operating expenses.

GAAP Provision for Income Taxes Excluding Special ItemsThe use of a GAAP provision for income taxes excluding special items allows management to evaluate the provision for income taxes across different reporting periods on a consistent basis, independent of special items including the tax provision impact of pre-tax special items. In fiscal year 2016, we began using a long-term tax rate to compute the GAAP provision for income taxes excluding special items. We reviewed the long-term tax rate on an annual basis and more frequently whenever events occurred that may have materially affected the long-term tax rate such as tax law changes; significant changes in our geographic earnings mix; or changes in our corporate structure. This long-term tax rate considered the income tax impact of pre-tax special items and eliminated the effects of significant non-recurring and period specific tax items which varied in size and frequency, including certain one-time tax charges resulting from U.S. tax legislation that was enacted on December 22, 2017. In the first quarter of fiscal year 2018, we began using a long-term tax rate of 14%, which was our forecast of the weighted average of our normalized fiscal year GAAP tax rate excluding special items over a four-year period, that included the past three fiscal years plus the current fiscal year projection at the beginning of fiscal year 2018. In the third quarter of fiscal year 2018, we modified our approach and began using a 12% tax rate for fiscal year 2018. Because of the impacts of tax reform, a long-term average tax rate was no longer appropriate for the remainder of fiscal year 2018. The tax rate of 12% best reflected the tax rate excluding special items for fiscal year 2018 as a single year. Maxim will use a tax rate of 13% for fiscal year 2019, which best reflects the tax rate excluding special items for fiscal year 2019 as a single year. Maxim will review the fiscal year 2019 tax rate whenever events occur that may have a material impact on the 13% tax rate, including tax law changes; new guidance interpreting existing U.S. and foreign tax laws; significant changes in our geographic earnings mix; or changes in our corporate structure.

GAAP Net Income and GAAP Net Income per Share Excluding Special ItemsThe use of GAAP net income and GAAP net income per share excluding special items allow management to evaluate the operating results of Maxim Integrated's core businesses and trends across different reporting periods on a consistent basis, independent of special items including intangible asset amortization; impairment of long-lived assets; severance and restructuring; other operating expenses (income), net; interest and other expense (income), net; and other income tax effects and adjustments. In addition, they are important components of management's internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents GAAP net income and GAAP net income per share excluding special items to enable investors and analysts to understand the results of operations of Maxim Integrated's core businesses and to compare our results of operations on a more consistent basis against that of other companies in our industry.

"Safe Harbor" StatementThis press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include the Company's business outlook and financial projections for its second quarter of fiscal 2019 ending in December 2018, which includes revenue, gross margin and earnings per share; the Company's belief that its business model enables it to be successful in any environment, the Company's plan to return 125 percent of free cash flow to shareholders in fiscal 2019 by increasing the share buyback, and the Company's belief that buying its shares is the best use of its cash in the current environment. These statements involve risk and uncertainty. Actual results could differ materially from those forecasted, based upon, among other things, general market and economic conditions, market developments that could adversely affect the growth of the mixed-signal analog market, product mix shifts, the loss of all or a substantial portion of our sales to one or more of our large customers, customer cancellations and price competition, as well as other risks described in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2018 (the "Form 10-K"). The Form 10-K may be found at https://www.sec.gov/Archives/edgar/data/743316/000074331618000031/maxim10-kfy2018.htm.

All forward-looking statements included in this news release are made as of the date hereof and based on the information available to the Company as of the date hereof. The Company assumes no obligation to update any forward-looking statement except as required by law.

About Maxim IntegratedMaxim Integrated develops innovative analog and mixed-signal products and technologies to make systems smaller and smarter, with enhanced security and increased energy efficiency. We are empowering design innovation for our automotive, industrial, healthcare, mobile consumer, and cloud data center customers to deliver industry-leading solutions that help change the world. Learn more at http://www.maximintegrated.com.